When clients are completing their estate plan and they have minor children one of the hardest questions to answer is what is the best way to leave assets? I would never advise clients to give large sums of money to 18 year old’s with no restrictions. So, what are some of the options that can be done?
If clients have minor children and both parents unfortunately die, the first suggestion I make is to allow the child to receive the money in installments. The number of installments and the amount of each installment is 100% custom. An example of this scenario would to have the child receive an installment when they reach the age of 18, 25, and finally 30. This allows a child to get access to some of the money early on but spaces the money out over a decade hopefully helping the child along the way.
Another very popular option is that we set up a College Incentive Provision located in a revocable trust. How this works is that that if the child obtains a bachelor’s degree from a college or university then they would receive their portion of the estate at an earlier age than if they didn’t go or finish school. An example for this for a college graduate would be one -third payout at 18, one-third payout when degree is achieved, and one-third payout at age 28. This definitely helps to give the child some encouragement to complete their studies.
If you are worried that the child has an emergency, can they get access to the money before the age? We would have a provision in their trust to establish a Children’s Single Fund Trust. What this does is establish a trustee of the money for the child/children. The trustee would be able to use the money as they consider necessary for the health, maintenance in reasonable comfort, or education of each of them.
When it comes to a topic like this, there are endless possibility’s on how you can distribute the inheritance to your child. And just because you decide one thing, does not mean you can’t change your answer in the future. As your children grow older, maybe it will change your decisions on how you would answer the questions. Different children mature at different rates. Revocable trusts are always amendable.
If you are ready to complete, update, or review your estate plan, contact us today.